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Snokist Growers v. Washington Insurance Guaranty Association

August 8, 1996

SNOKIST GROWERS, A WASHINGTON CORPORATION; DAN A. MCDONALD AND MILDRED MCDONALD, HUSBAND AND WIFE, AND THE MARITAL COMMUNITY COMPOSED THEREOF; ROBERT L. CROSSLAND AND MARGARET CROSSLAND, HUSBAND AND WIFE, AND THE MARITAL COMMUNITY COMPOSED THEREOF; FRANK COLEMAN AND PATRICIA COLEMAN, HUSBAND AND WIFE, AND THE MARITAL COMMUNITY COMPOSED THEREOF; MARY OLSEN, INDIVIDUALLY AND AS FORMER PERSONAL REPRESENTATIVE OF THE ESTATE OF HOWARD OLSEN; AND VIRGINIA SALVERDA, INDIVIDUALLY AND AS FORMER PERSONAL REPRESENTATIVE OF THE ESTATE OF ROY SALVERDA, APPELLANTS,
v.
WASHINGTON INSURANCE GUARANTY ASSOCIATION, A WASHINGTON ASSOCIATION; AMERICAN ECONOMY INSURANCE COMPANY, A FOREIGN INSURANCE COMPANY; ROYAL INSURANCE COMPANY, A FOREIGN INSURANCE COMPANY; FEDERAL INSURANCE COMPANY, A FOREIGN INSURANCE COMPANY; CENTURY INDEMNITY INSURANCE COMPANY, A FOREIGN INSURANCE COMPANY; TRAVELERS INDEMNITY COMPANY, A FOREIGN INSURANCE COMPANY; ST. PAUL FIRE AND MARINE INSURANCE COMPANY, A FOREIGN INSURANCE COMPANY; RELIANCE INSURANCE COMPANY, A FOREIGN INSURANCE COMPANY; CONTINENTAL CASUALTY COMPANY, A FOREIGN INSURANCE COMPANY; YOSEMITE INSURANCE COMPANY, A FOREIGN INSURANCE COMPANY; EAGLE STAR INSURANCE CO., LTD., A FOREIGN INSURANCE COMPANY; TRANSCONTINENTAL INSURANCE COMPANY, A FOREIGN INSURANCE COMPANY; AMERICAN HOME ASSURANCE COMPANY, A FOREIGN INSURANCE COMPANY; EMPLOYERS REINSURANCE CORPORATION, A FOREIGN INSURANCE COMPANY; AND THE HOME INSURANCE COMPANY, A FOREIGN INSURANCE COMPANY, RESPONDENTS, GENERAL INSURANCE COMPANY, A WASHINGTON INSURANCE COMPANY, DEFENDANT.



Appeal from Superior Court of Yakima County. Docket No: 94-2-00136-1. Date filed: 01/05/95. Judge signing: Hon. Heather Van Nuys.

Opinion Amended and Ordered Published, September 24, 1996,

Authored by John A. Schultheis. Concurring: Dennis J. Sweeney, Philip J. Thompson

The opinion of the court was delivered by: Schultheis

SCHULTHEIS, J. Snokist Growers and the estates and/or marital communities of former Snokist officers and members of its board of directors appeal the superior court's summary dismissal, without prejudice, of their declaratory action against their comprehensive general liability and excess insurers. *fn1 Snokist and the individual plaintiffs contend their insurers have a duty to defend them against and indemnify them for claims made by U-Haul Company of Inland Northwest for the cost of environmental cleanup of U-Haul's property. Yakima Valley Spray Company (YVS), now defunct, owned the subject property prior to 1974 and operated a pesticide manufacturing plant there. Snokist was a majority shareholder in YVS, and the individual plaintiffs in this action also served on YVS's board or were officers or shareholders of that company. We affirm the superior court's dismissal of the action.

In November 1988, U-Haul notified Snokist that the Washington State Department of Ecology was investigating the subject property for possible contamination by pesticides. After discovering concentrations of hazardous wastes at the site and detecting perchloroethene in area groundwater, Ecology designated U-Haul a "potentially liable person," as defined in RCW 70.105D.020(15) *fn2 of the model toxics control act. Ecology issued an enforcement order in December 1991, requiring U-Haul to perform a remedial investigation and feasibility study (RI/FS) for the property. *fn3

In 1990, before Ecology entered the enforcement order, U-Haul filed lawsuits in superior court and in federal court against multiple parties, all of whom it alleged were prior owners of the subject property. The defendants included the individual plaintiffs in this case, but did not include Snokist. These suits were brought under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C.A. sec. sec. 9601-9675 (West 1995), and under the model toxics control act, RCW 70.105D. Under Washington's act, current owners of property are liable for cleanup of hazardous waste sites, as are persons who were owners at the time the hazardous substances were released. RCW 70.105D.040. The act is based, in part, upon the federal act, which also imposes liability on current owners and owners at the time of release. 42 U.S.C.A. sec. 9607.

U-Haul alleged the individual plaintiffs were owners, officers, and/or board members of YVS and sought damages for the alleged release of hazardous substances on the property during the time YVS owned it. U-Haul also sought a declaration the defendants were responsible for cleanup of the property. *fn4 The individual plaintiffs and Snokist subsequently executed Standstill and Tolling Agreements with U-Haul that tolled the statute of limitations as to them. U-Haul's counsel attested he advised Snokist that U-Haul would join it as a defendant in the state and federal actions if it did not sign the agreement. On the basis of the signed agreements, U-Haul dismissed the individual plaintiffs from the lawsuits.

In June 1992, Snokist and the individual plaintiffs agreed with U-Haul to share in the cost of performing the RI/FS requested by Ecology. A revised draft report was submitted to Ecology in August 1994. On approval of the final report, Ecology will set a schedule for cleanup.

In 1994, Snokist and the individual plaintiffs brought this action against their insurers. *fn5 They sought a declaration the various policies insured Snokist and its officers, directors, shareholders and employees against "all sums [ become legally obligated to pay as damages arising from alleged contamination and property damage on the Yakima property . . . ." In addition, they sought a declaration the primary liability carriers' and American Home Assurance Company's refusal to investigate and defend against claims for such damages was wrongful.

The insurers successfully moved for summary judgment. The court held there was neither a duty to defend nor a justiciable controversy sufficient to support a declaratory action on the issues of coverage and indemnification. The court relied upon the fact U-Haul had not sued Snokist, and the fact its lawsuit against the individuals did not seek to hold them liable in their capacities as Snokist's officers or directors. It stated: "[ service as YVS board members was within the scope of their duties as Snokist board members, their conduct as YVS members is not within the scope of [duties as Snokist members and consequently the policies do not provide coverage." The court also entered a certificate of finality under CR 54(b). Although the dismissals were without prejudice, the court was persuaded delaying the appeal would adversely impact the ability of Snokist and the individual plaintiffs to participate in the cleanup and to engage in settlement negotiations regarding responsibility for cleanup costs.

(1) Does a justiciable controversy exist, such that a court can determine whether the insurers have a duty to indemnify?

The trial court dismissed Snokist's and the individual plaintiffs' action for declaratory relief on the ground it did not present a justiciable controversy. A justiciable controversy is:

(1) . . . an actual, present and existing dispute, or the mature seeds of one, as distinguished from a possible, dormant, hypothetical, speculative, or moot disagreement, (2) between parties having genuine and opposing interests, (3) which involves interests that must be direct and substantial, rather than potential, theoretical, abstract or academic, and (4) a judicial determination of which will be final and conclusive. Walker v. Munro, 124 Wash. 2d 402, 411, 879 P.2d 920 (1994) (quoting Nollette v. Christianson, 115 Wash. 2d 594, 599, 800 P.2d 359 (1990)).

The insurance policies here provide coverage for sums "the insured is legally obligated to pay." The insurers argue that Snokist's and the individual plaintiffs' legal obligation for the costs of cleanup is speculative and therefore nonjusticiable. For purposes of asserting a claim for defense and indemnification of U'Haul's claims against it, Snokist appears to take the position that it stands in the shoes of YVS, and is strictly liable under RCW 70.105D as a prior owner. *fn6 But the record indicates only that Snokist was a majority shareholder in YVS and that Snokist board members and officers also ...


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